To submit a bid or offer for a product, service, or contract that is lower than the price offered by a competitor or the expected market value. This strategy is often employed to win a contract by offering a more attractive price, even if it means accepting a lower profit margin or incurring a potential loss. The act of underbidding can be a risky move, particularly if the bidder underestimates the costs involved or if unforeseen expenses arise. A successful underbid can secure a project, but it can also lead to financial struggles if the price is set too low.
Underbid meaning with examples
- The construction company decided to underbid their rivals on the city hall renovation project, hoping to secure the lucrative contract. They calculated the projected costs meticulously, but they were taking a gamble, hoping for smooth sailing. This would ultimately lead to significant future gains. Despite the risk, it could lead to a valuable foothold in the city's market and a reputation.
- In an attempt to gain market share, the new software company dramatically underbid its competitors for the enterprise license, hoping to attract many new clients. They knew that providing the software for a low initial fee would bring many new potential clients in and would allow the company to later upsell the customer. This move came with significant initial investment.
- The desperate online marketplace seller decided to underbid every other seller on a popular item to make a quick sale. They made sure the loss could be covered with existing capital. They just needed the cash flow now! This, however, could hurt their long-term profitability and brand reputation. They sacrificed profit to liquidate inventory rapidly.
- The marketing agency strategically chose to underbid for a new campaign, aiming to attract a client initially and secure a long-term partnership, even if the first project yielded only a small profit. They hoped their work would stand out and open doors to more lucrative opportunities. They calculated that the customer would come back and recommend them.